First harbingers of an incipient dynamic in the Swiss corporate tax landscape

in Tax, 02.04.2019

As KPMG’s Swiss Tax Report 2019 shows, the cantons of Vaud and Basel-Stadt are bringing some movement into the corporate tax rate situation for companies, which has been stagnating for years. These two cantons might be the first harbingers of a trend that could potentially usher in fundamental changes to the Swiss corporate tax landscape in the near future.

KPMG’s Swiss Tax Report 2019 compares corporate and income tax rates in 130 countries as well as all 26 cantons.

Vaud and Basel-Stadt as harbingers of a growing trend

Ranked by regular corporate tax rate, the cantons of Central Switzerland and the Canton of Appenzell-Ausserrhoden still come out on top with the lowest rates. On average, corporate tax rates for companies were only reduced marginally year over year, as was the case in the cantons of Zug, Schwyz and Glarus. Only the cantons of Vaud and Basel-Stadt made substan-tial cuts to their tax rates this year. These two cantons are harbingers of a trend that could potentially usher in fundamental changes to the Swiss corporate tax landscape in the near future.

Ireland still the strongest competitor in Europe

A comparison of European countries found nearly no changes among the top-ranked locations with very low tax rates. The cantons of Central Switzerland were extremely well positioned in this segment in 2018, as well. Regular corporate tax rates were only lower in the Channel Is-lands (0%) and a few counties in (South-)Eastern Europe. In Europe, the most competitive lo-cation is still Ireland with a corporate tax rate of 12.5%.

Overview of cantonal corporate tax rates for companies

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Central Switzerland’s attractiveness also unrivalled for individuals

The cantons of Central Switzerland also topped the charts in an intercantonal comparison of individual tax rates – together with the Canton of Appenzell-Innerrhoden.

After a gentle downward trend, the average top income tax rate over the past 10+ years has settled at just below the 34% mark. The cantons of Central Switzerland and Appenzell-Innerrhoden have topped the rankings since 2007.

Income tax rates of Swiss cantons at a glance 

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Individual tax rates in Switzerland in line with European average

In a continental comparison, countries in (South-)Eastern Europe still have the lowest tax rates for high incomes – in part due to flat tax systems. The tax rates levied on high incomes in most Swiss cantons are in line with the European average. Extremely high income tax rates can still be found in the countries of Western Europe and Scandinavia.

A global comparison of income tax rates paints a somewhat mixed picture: While well-known offshore domiciles and a few isolated Middle East countries continue to waive income taxes entirely, some countries such as South Africa, Australia, China and Japan have extremely high top tax rates in place.

Over the long term (2007-2019), the tax cuts introduced by Central and Eastern European countries for high incomes stand out most prominently: Hungary has lowered its top rate by 21 percentage points since 2007, Bulgaria by 14 and the Czech Republic by 10. These stand in stark contrast to those Western European countries which have increased their tax rates in the past 10+ years, in some cases significantly, whereby the largest hike was in Iceland where it rose from 35.70% (2007) to its current level of 46.24%.

Clarity on Swiss Taxes in 100 seconds

Tax landscape in Switzerland and internationally

 

 

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